Question
Question 4 Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments
Question 4
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments at 10% is $ 681,600. Title passes to Erica at the end of the lease.
Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation over the equipments expected useful life of eight years, with no residual value.
Instructions (Round values to the nearest dollar.)
a) Prepare a lease amortization table for 2020 and 2021.
b) Prepare the general journal entries relating to this lease for 2020.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started